Not all tax filers like to receive the 1099s except the IRS. But the agency likes them as they allow them to easily match the data against the tax returns. So it becomes necessary for every tax filers to know better about the IRS Form 1099 before you start filing your taxes. Therefore, this blog aims to put light on the top ten things that an individual taxpayer must know before filing.
1. Better give than receive:
Usually, the businesses will issue the forms to their payee (other than the corporation) when they pay $ 600 or more during the tax year. And this is a threshold rule followed but there are many exemptions in that. This is the reason why you are getting Form 1099 for every bank account associated, even though you earned about $10 of interest income.
2. Varieties of many 1099s: You must know the varieties of 1099 forms. 1099 B for Broker and barter transactions, 1099 DIV for dividends, 1099 G for state and local tax refunds and unemployment benefits, 1099 INT for interest, 1099 R for pensions, 1099 S for real estate transactions, etc. Apart from those forms, Form 1099 MISC (miscellaneous) covers the biggest portion of the taxes and prompts the most questions.
3. Timing: The time to send the 1099 form is important. The businesses need to send out the Forms 1099 before Jan 31 for the calendar year. Do not consider that you are off the hook to report the income in the event of not receiving Form 1099 by the month of February or March. In that case, there will be penalties for the companies, which issue the form 1099 But some tax filers might have already filed their return and the form 1099 comes as late as April or May.
4. Report the change in contact address: The IRS gets the report based on your Social Security Number (SSN) not considering whether you receive the form. Therefore, it is better to update your contact address with the payers directly and also to put a forwarding order in with the U.S. Post Office. Hence, you will see all the forms that the IRS sees.
5. Beware of the IRS forms: Whatever forms are sent to you, will also be sent to the IRS. The deadline to mail the 1099 forms to the taxpayers is by Jan 31. The payer has the deadline until the closure of February to send all the 1099s to the IRS.
6. Ensure report the errors instantly. If there is a time delay, then you may have some extra chance to correct the errors. Hence avoid putting the arriving 1099s in a stack, open them as soon as you receive them and respond to them immediately. If you found any errors then you can approach the payer immediately to mention them.
Therefore, the payer gets some time to correct the errors before sending them to the IRS. But when the payer has already dispatched the form that contained errors to the IRS, then ask the payer to correct them instantly.
7. Report every 1099 form. The ultimate role of Form 1099 is IRS’s matching. Each Form 1099 contains information such as the payer’s Employer Identification Number (EIN), and payee’s Social Security Number (SSN). When the IRS receives the form, it matches the Form 1099s with the tax return of the payee.
When you do not accept the information on the form provided by the payer and also you cannot convince the payer about the correctness, then you can approach the IRS with your own tax return. However, in every case, when you receive Form 1099, you need to accept it as the IRS won’t.
8. Notice from the IRS. What happens when you forget to report the 1099? Then the IRS will send you a computer-generated bill that contains your taxes. If the billing is correct, then you just need to pay it.
9. Think about State taxes also. Every state demands an income tax and you will receive the same details as the IRS. In that condition, if you missed or failed to file 1099 on your federal return, then your state will include that in your bill too.
10. File 1099 on your own: When you did not receive the Form 1099 that you expect, do not ask from the payer. Instead, if you are expecting, you know about your income clearly, so you can just report the amount on your tax return. It saves you time and effort. Alternately when you write or call your payer regarding the late 1099s then you may get two 1099s, one 1099 is issued normally (default one, even if you didn’t receive it) and the other is issued when you called the payer. Avoid confusion and file directly.
In short, 1099 forms are important for IRS matching. Therefore, these forms are really serious and have much to do with your taxes. This blog could have given a basic outline of the 1099 forms. To know more and for other queries, you are just a call away from us to reach our customer support team at 703-229- 0326 or drop a mail at email@example.com. We are happy to assist and serve you at any time. Register NOW! and e-file your 1099 taxes.